Price hike hits platinum sector
By Liu Jie (China Daily)
Updated: 2004-03-15 08:34

Consumers looking to buy platinum jewellery could soon pay much more for the precious metal as market prices hovered at 24-year highs, - above US$900 an ounce (US$32.13 per gram) last week. 

Friday's open price for platinum was 247.50 yuan (US$29.82) per gram on the Shanghai Gold Exchange (SGE), China's sole precious metal market, and closed at 248.05 yuan (US$29.89) per gram.

Ren Liangfu, general manager of the Zhejiang Sun and Moon jewellery Group (North China), said the "sky-high" price resulted in a sharp increase in the cost of materials. But he said retail prices could not, in turn, be raised due to fierce competition amongst jewellers.

At this point, consumers have not noticed an increase in price because of a stockpile of the precious metal, explained Wang Chunli, general manager of the Caishikou Department Store, the capital city's largest jewellery retailer and a member of the SGE.

"If the stockpile is used up, a price increase will be inevitable, which may lead to a slow-moving market," said Wang.

Insiders say the average price of platinum jewellery from processors was about 240 yuan (US$29) per gram, while the retailing price was only 256 yuan (US$31) in Beijing and 249 yuan (US$30) in Shanghai in the last two months.

"Rocketing platinum price have already squeezed jewellers' margins and have resulted in jewellery processors and retailers holding back on metal purchases until prices are eased or retail prices are raised," said Liu Shan'en, an analyst with the Beijing Gold Economic Development Research Centre.

The price of platinum has been increasing for several years.

In 1999, the unit price was US$360 an ounce (US$12.92 per gram), which climbed swiftly to US$600 an ounce (US$21.42 per gram) in 2000 and US$800 an ounce (US$28.56 per gram) in 2003.

"The robust rebound of the price of platinum is due to the special characteristics of the precious metal, which can not only be processed into jewellery and ornaments but is also widely used in industrial sectors," said Liu. "And industrial demand has witnessed a sharp increase in recent years."

Moreover, South Africa's Anglo Platinum Company, the world's largest platinum mining firm, was reported to have enhanced production to meet the increasing demand in the international market, which led to over demand and short supply. But the company denies this.

"Anglo announced recently it would cut down production from 3.5 million ounces to 2.9 million ounces in 2006, which was another trigger for the price hike," said Liu.

A report from the International Platinum Association revealed that China - where demand for platinum jewellery was virtually non-existent ten years ago - is now the world's largest single market for platinum jewellery and made up for 52 per cent of world consumption last year.

In fact, the nation has been the largest purchaser of platinum in the last four years.

China imported 40 tons of raw platinum in 2002, about 55 per cent of the world's total platinum output, and mainland consumers spent US$2 billion on platinum jewellery and decorative items in 2001, according to latest statistics from the China Gold Association.

SGE began official platinum trading on August 13 last year. Up until December 25, 2003, the combined total transaction volume amounted to 7,500 kilograms.

Platinum jewellery demand from China will slip for the first time since the market took off in the mid-1990s, said Johnson Matthey Plc, the world's top platinum distributor.

Sales of platinum jewellery were down 19 per cent, to 1.2 million ounces (34.02 million grams), last year due to price increases, the company said in a report.

"In the long term, however, China remains the brightest hope for an industry coping with slack sales growth elsewhere," said the company.

Despite record high price, die-hard customers remain, mostly belonging to a burgeoning urban elite. "It's true prices are higher now, but it's not really a big concern. I will still buy it if I like it," said Liu Yili, a trendy 26-year-old, who was proudly sporting a newly purchased necklace.

Some domestic jewellers are considering using palladium as a jewellery making materials. It's colour and hardness are similar with platinum, but the price is around 80 yuan (US$9.64) per gram.

"Platinum is a symbol of elegance and treasure, I will not buy the substitution," said Liu.